The Canadian dollar weakened after Trump announced the end of all trade talks due to an anti-tariff ad from Ontario. Despite this, the USD/CAD pair only rose slightly by 0.2% since there has not been much progress in US-Canada trade discussions. There is an increased possibility of a rate cut from the Bank of Canada, likely by 25 basis points, reflecting current market expectations of 18 basis points. Trade tensions and ongoing US tariffs are affecting Canadian businesses’ investments and hiring. Concerns about the economy and employment may overshadow the unexpectedly high inflation rate of 3.8% in September.

Canadian Dollar Outlook

The outlook indicates challenges for the Bank of Canada in stopping its easing measures, which might weaken the Canadian dollar further. In the short term, the USD/CAD could rise above 1.410. However, by the end of the year, a weaker US dollar might bring the pair closer to 1.38. FXStreet offers insights from various market experts and other financial analyses. The platform is not responsible for any errors and encourages personal research for investment decisions. It does not provide personalized financial advice and highlights the risks involved in investing. The sudden halt of US-Canada trade talks has increased pressure on USD/CAD. While we noticed a jump in the pair, the response was limited because there was little hope for a deal. The latest Bank of Canada Business Outlook Survey for Q3 2025 revealed a notable decrease in investment plans, confirming that trade uncertainty continues to weigh on the economy.

Bank of Canada’s Upcoming Meeting

Attention is now on the Bank of Canada meeting next week, where a rate cut seems increasingly likely. Although recent inflation reports show a steady rate of 3.8% for September 2025, the central bank is expected to focus on supporting the economy in light of new trade difficulties. This could mean further easing into 2026, keeping the Canadian dollar weaker. As a result, there are short-term opportunities to take advantage of potential increases in USD/CAD. Buying call options around 1.4100 is a smart strategy in anticipation of a possible spike, especially as implied volatility is expected to rise. This situation is similar to the uncertainty experienced during USMCA negotiations from 2018 to 2020, which favored long volatility strategies. However, the upward trend in USD/CAD may only last for a short time. Growing expectations for the US Federal Reserve to start its own easing cycle in early 2026 could limit the dollar’s strength. Therefore, anyone holding long positions should be cautious, as a wider decline in the US dollar could pull the pair back toward the 1.38 level by year’s end. Create your live VT Markets account and start trading now.

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